Making him an “example” in a pioneering white-collar crime prosecution, a federal judge sent the mastermind of the New Haven Savings Bank/NewAlliance bank scam to a year and a day in the slammer.
U.S. District Judge Janet Bond Arterton recommended a minimum security “camp” for Robert R. Ross, 62, sentencing him Friday to the prison term plus three years of supervised release.
This case is believed to be the first federal prosecution of its kind involving people profiting illicitly from a bank conversion.
Ross (pictured above) pleaded guilty to arranging to pour $4.9 million of his own and his partners’ money into lucrative stock sales to which they weren’t legally entitled. He did it by giving the money to depositors of the old New Haven Savings Bank to buy favorably-priced stock in their own names in a 2004 initial public offering, when the bank demutualized and became NewAlliance. The depositors turned over the stock to Ross, who immediately sold it when the stock began trading publicly and grabbed a 50 percent profit. He shared a bit of those profits with the depositors.
Sentencing guidelines had recommended a prison term of 36 to 47 months. Prosecutors asked for Ross to have a reduced sentence for cooperating with the FBI in last summer’s trial of the “middleman” of the scam case, John M. Lucarelli.
“It is a tragedy of huge proportion to have a person of your stature and your reputation to have fallen off the beam,” Arterton told Ross before issuing the sentence. While she recognized evidence showed Ross was an “honest man” and “a family man,” she told him she couldn’t let him get away with just cutting a check for the $900,000 he gained in illicit profits. She told him she sent him to jail as a “general deterrent” for investors across the nation.
In an over-two-hour sentencing in New Haven’s U.S. District Court, Ross sat quietly, slowly turning a yellow pencil between his fingers, as his attorney spoke on his behalf.
Ross’s attorney, Steven M. Kowal of Chicago, argued that since this was the first IPO conversion Ross had attempted to profit from, and since no one has ever been prosecuted for this type of financial scam before, his client should not have to go to jail.
“Bob Ross is a good man who made one very bad mistake,” said Kowal. “He did the same thing that thousands of other people did in hundreds of other bank conversions.”
“Everybody does it” is not a good enough excuse, countered Assistant U.S. Attorney Michael S. McGarry, adding Ross “showed utter disregard for the securities laws” and ripped off shareholders by preventing them from buying all the shares they wanted.
Judge Arterton agreed. The “everybody’s doing it” attitude “speaks very strongly to the need for deterrence up a notch,” she said. She said she saw a “special need to promote respect of the law in the contest and history of disregard for it.”
Before being sentenced, Ross brought his legal pad to the podium to read a short apology: “My decision to participate in this bank conversion was a terrible mistake in judgment, the worst mistake of my life,” he said. “I do accept responsibility. I apologize to the court, the community, my friends and business associates, and especially to my family.”
Weighing whether to send Ross to prison, Arterton said it was important to uphold the sentencing guidelines’ purpose of equalizing punishments for white-collar and street crimes. Ross is scheduled to report to prison on Sept. 19 and pay $989,777 to the SEC in restitution.
Ross was the star witness and mastermind in the scheme, but his lawyer placed some of the blame on a yet-to-be-sentenced collaborator in the scheme, George J. Kundrat.
Kundrat, who has pleaded guilty to one count of conspiracy to commit mail fraud, wire fraud and securities fraud, is scheduled to be sentenced at 2 p.m. July 10.
A smaller player, New York investor Chance M. Vought, was sentenced to one day in prison after pleading guilty to his role in the scheme, and agreeing to pay $315,799 in restitution.
The big question mark surrounds “middleman” Lucarelli, who was convicted by jury of conspiracy and securities fraud charges last July. Judge Bond later tossed out the charges on a technicality. Last week, Arterton rejected federal prosecutors’ request to revisit her decision. Prosecutors have 30 days to appeal; they have not decided if they will do so, said U.S. Attorney Office Spokesman Tom Carson Friday.
Judge Janet Arterton wants to send a message and "deter" white collar financial criminals and further ensure their sentences are equalized with those meted out for "street" crimes? Odd, coming from the same judge who walked Ben Hunter, the New Haven city official who embezzled federal funds, forged checks and diverted tens of thousands of taxpayer dollars to his own bank account. What "message" did Arterton send out with the Hunter sentence? Hire Hugh Keefe or another politically powerful lawyer and the self-described feminist "get-tough-on-white-collar-criminals" judge will shrivel up and go soft. If anything, Arterton deters people from taking her seriously.